Art Diamond's web log

Stigler on Berle and Means

I remember George Stigler in class making some reference to a book by Berle and Means, and asking if any of us had ever heard of them. None of us had. My memory is that he looked sort of sadly amused.

At least one of Stigler's important papers had taken on, and refuted, some of the important claims of the Berle and Means book.

Now, decades later, I recently read a wonderful book on the Great Depression called The Forgotten Man. It turns out that Berle was very important in the growth of government in FDR's New Deal.

I now realize what I did not realize when I took Stigler's class---that Stigler had done something significant in refuting errors that supported misguided policies that hurt the economy.

It is a sad fact of life that future generations will not remember, or appreciate, the triumphs of the 'good guys' because they do not appreciate the impact of the good guys' adversaries.

Stigler had beaten Berle so fully that the younger generation did not even recognize Berle's name. And in not recognizing Berle's name, or his significance, they could not appreciate the value of what Stigler had accomplished.

Book reference:

Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: HarperCollins, 2007.

Comments

Just a note to thank Art for the kind reference to TFM. There's a lot of amnesia in American economic history and the Stigler irony in re Berle was about that. Another forgotten name is Rexford Tugwell, who, along with Henry Wallace and others, can be regarded as parents of the current farm bill.
How did the country come down with amnesia? When Keynesianism came into the classroom after World War II, the professors began to gloss lightly over the New Deal, since there were elements to it that Keynesians, especially, disapproved of. You can find some legitimate arguments by serious economists such as Price Fishback that the New Deal was not Keynesian, and it wasn't, in the sense that FDR couldn't and didn't spend sufficiently to satisfy orthodox Keynesians. (For those of you who saw it, the review by Price of THE FORGOTTEN MAN in the Journal of Economic History was really wonderful. http://journals.cambridge.org/download.php?file=%2FJEH%2FJEH68_01%2FS0022050708000260a.pdf&code=2f6109b04d546d6bd298f403f4d38dc7 but I think that he misrepresents me as saying FDR was an orthodox Keynesian -- I didn't. The proof of that is in some of the other criticism of THE FORGOTTEN MAN. The TLS in the UK attacked THE FORGOTTEN MAN for denying that the New Deal was Keynesian.)
The New Deal was also not Keynesian in the sense that many of the New Dealers thought they working in the tradition of Irving Fisher or various monetary theorists on the domestic side. They didn't think they were importing policy from a man in the UK.
But another reason scholars of Keynesianism don't make the link is that the spending that happened in the 1930s which was significant, did not bring recovery. The New Deal didn't work. Some of the things Berle said were ridiculous. The New Dealers embarrassed the postwar Keynesians. So they simply were not taught. The lessons of the New Deal mistakes were therefore never sufficiently absorbed.
Recently, looking at GOD AND MAN AT YALE, I was reminded that Bill Buckley deplored the extent of the switch to Keynesianism at the American University. And GOD AND MAN appeared more than half a century ago. The profs threw out classical econ and taught Keynes, Keynes, Keynes. It just had to be either/or, apparently.
TFM is coming out in paperback this month with material for the classroom, such as a cast of characters, a New Deal timeline, and an essay on the bogus aspects of federal job creation.